The road to Rio could be a long one for BHP as the takeover target said the new 3.4-for-one offer still undervalued the company.

"BHP Billiton's offer, while improved, still fails to recognise the underlying value of Rio Tinto's quality assets and prospects," Rio chairman Paul Skinner said.

BHP chief executive Marius Kloppers said yesterday in a conference that the company would press on with a hostile bid if Rio did not come to the table.

Kloppers also added that BHP had the finance in place for the takeover deal.

The Times Online reported that BHP had secured $55 billion from banks to finance the Rio acquisition, with the bulk of that to fund a $30 billion share buyback once the deal is sealed and the rest to refinance Rio's existing debt.

However it could be some time before BHP will be able to go through with that plan, with the offer needing regulatory approval before an offer document can be sent out to shareholders, and this is expected to take 9-12 months.

The newswire also reported that BHP's formal bid could be blocked by Japan's anti-trust watchdog which has started discussions with European regulators over blocking the deal.

Industry insiders told the newswire that the Japan Fair Trade Commission was addressing fears from local businesses which fear they will lose their bargaining power if BHP and Rio merge.

The tie-up of the giants will see it control 70% of the world's iron ore market.

The monopoly issue was also mirrored in China late last year when Kloppers did the rounds in Asia, however there is growing concern that China could gain control of Rio and subsequently the iron ore market.

State-owned Chinese company Chinalco and partner Alcoa control 24% of the world's iron ore market following last week's raid on Rio.

It was reported yesterday that Chinalco and Alcoa could be preparing its own bid for Rio Tinto, however an Australian-based spokesperson for Chinalco said a takeover was not on the agenda.

Analysts have been reported as saying that Rio's rejection of BHP's bid was not unexpected, with the takeover target recently commissioning Merrill Lynch to analyse how much BHP should be offering.

In that study, analysts reportedly said BHP could afford a 5-for-1 offer of both scrip and cash, with the cut-off at 4.25-for-1.

Shares in Rio shed $1.49 to $125.65 while shares in BHP dropped 25c to $36.41 this morning.